BURLINGTON — A local co-op seeking to purchase Burlington Telecom will be among the two final bidders after a City Council vote Monday, much to the elation of supporters who packed City Hall.
Burlington Telecom is owned by the holding company Bluewater Holdings and its assets are leased back to the city, an arrangement reached following a settlement with Citibank. The 2014 settlement with Citibank ended a $33 million lawsuit brought by the bank, which had loaned money to Burlington Telecom.
Burlington’s agreement with the holding company allows the city to select a buyer, which the City Council expects to do at its next meeting in two weeks. The sale must be completed by year’s end to ensure Burlington keeps the largest portion of the proceeds.
In addition to the Keep BT Local co-op, the city will also consider a final offer from Ting, a fiber company owned by Toronto-based Tucows, which offered $27.5 million in its letter of intent. Another bid from Schurz Communications for $30.8 million did not make the cut.
The Keep BT Local offer is for $12 million. The co-op’s supporters said that the fiber network should operate as a public utility, and selling to the co-op is the best way to ensure its treated that way going forward.
Mayor Miro Weinberger had urged councilors to block the advancement of the co-op in the bidding process, arguing that KBTL isn’t financially viable, lacks managerial experience and would face legal and regulatory hurdles. At a news conference last week he said a lawsuit from Citibank is a “near certainty” should Burlington accept the co-op’s low offer.
Dean Corren, a former Progressive state representative, gave remarks that typified those of co-op supporters. He referred to Ting and Schurz as “Comcast by any other name,” highlighting a major concern among advocates for local ownership who fear no deal with a corporate buyer would bind a telecom giant should it purchase them in the future.
“You cannot run a city based on threats of corporate litigation,” Corren said.
Corren was not the only Keep BT Local supporter who took aim at the mayor. Several held signs that read, “How about we keep our internet & just sell Miro instead.”
At Monday’s meeting, Weinberger defended himself against criticism. The settlement, he said gave the city control over the future of Burlington Telecom. Citibank had initially sought to force the fiber network into receivership.
“We heard frequently tonight that it’s important to fight the banks and not be afraid of litigation. I just hope we all remember the history. We did fight. I did fight,” Weinberger said.
A few people spoke in favor of the other bids, arguing that Burlington has an obligation to all its taxpayers in the sale — not just the Burlington Telecom subscribers who would become co-op members. Others questioned whether the debt-financing is workable.
The Keep BT Local bid relies on a $10 million loan at 14 percent interest. Board members for the group have said the debt load is manageable because the largest payments would be made later on.
City Council President Jane Knodell, P-Central District, was among several councilors who voted for the co-op Monday night. Knodell said Keep BT Local has more work to do to make the final round.
Knodell reviewed the bidders’ pro-formas, or 10-year projections. The information is not public, because it includes proprietary information about the bidders.
Currently, Burlington Telecom is paying for growth out of profits. Keep BT Local would have a difficult time keeping up with debt payments under that scenario, Knodell said.
“It can be done, but it has to be flawless,” she said of the co-op’s plans for Burlington Telecom. Her message to the co-op board: “Please don’t rest on your laurels. Keep working hard.”
The co-op’s board has said it believes it has a financially sound proposal that will pass regulatory muster. On Monday, KBTL announced an “Executive Transition Advisory Board” to help guide it through the next phase of the bidding process.
Among those on the executive transition team are Avram Patt, a former Washington Electric Co-op general manager, and Carina Driscoll, a former state representative, city councilor and Sen. Bernie Sanders’ stepdaughter.
In the end, six councilors voted for KBTL and five voted for Ting. City Councilor Kurt Wright, R-Ward 4, gave the lone vote for Schurz.
Several councilors who voted for Ting said they appreciate the benefits of local ownership that the co-op offers, but those benefits won’t be realized if Keep BT Local can’t survive the in the short term.
City Councilor Karen Paul, D-Ward 5, said the co-op’s pro-formas pencil out, but they include no cushion for the unexpected. A recession or other economic disruption could tank a co-op owned Burlington Telecom, she said.
Though Knodell didn’t vote for Ting, her comments signaled that it may be the bid she ultimately supports if the co-op can’t sufficiently improve its offer. The council president said she thinks Burlington should choose a buyer who can help the local tech economy flourish, something Ting has made the greatest commitment to thus far, pledging $250,000 to specific local efforts including BTV Ignite.
“The next Skype could come out of Burlington. I think we need to be thinking quite big when it comes to this sale,” Knodell said.
Also at Monday’s meeting, the City Council approved a final development agreement with Burlington Town Center owner Don Sinex, paving the way for the redevelopment of the downtown mall.
Sinex said after the vote that work would begin in November, but it will be at least another month before demolition is underway.
Correction, Nov. 7 at 11:01 a.m.: An earlier version of this story misstated when the city entered an agreement with Bluewater Holdings.
